Arjun Company uses the equity method to account for its 40% investment in Joshua Company common stock. Joshua’s net income was $160,000; dividends paid were $85,000. Arjun was able to take a 65% dividend exclusion on its tax return. The tax rate is 20%. How much is the deferred tax liability?($160,000 -$85,000) x .40 x .35($160,000 - $85,000) x .40 x .20($160,000 - $85,000) x .40 x .35 x .20($160,000 - $85,000) x .40 x .65

Deferred tax liability is the liability to pay the taxes but it is deferred which means it is due…

Answered: Arjun Company uses the equity method to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Arjun Company uses the equity method to account for its 40% investment in Joshua Company common stock. Joshua’s net income was $160,000; dividends paid were $85,000. Arjun was able to take a 65% dividend exclusion on its tax return. The tax rate is 20%. How much is the deferred tax liability?
1. ($160,000 -$85,000) x .40 x .35
2. ($160,000 - $85,000) x .40 x .20
3. ($160,000 - $85,000) x .40 x .35 x .20
4. ($160,000 - $85,000) x .40 x .65

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